So here we are after a pretty nice rally over the last several weeks .So is this a normal pullback or is this the start of something bigger? I'm pretty sure cnbc is bringing out all the doomsayers today but to be quite honest NOBODY knows.
So what to do? For my clients I have bought a starter position in sds which has made a double bottom and has turned up. SDS is a etf that double shorts the s&p 500. I am not selling any of my long positions but this is a hedge to see how it plays out .
The trend is still up for stocks and relative strength of stocks vs. bonds or cash is still in favor of stocks. What is troubling is the previos high on the s&p was in the 1370 back range back in May, it went down to the 1260 area and then rallied up to 1350 before turning down again. What this means is that it made a lower high which to me means there could be a problem.
Bond yields are dropping which means there are some serious problems. If people are willing to take a yield of less than 3% on a 10 year govt bond is very troubling.
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